Saturday, February 07, 2009

A little history of how we enter a Great Depression

I see a depressing amount of the same stuff happening today, minus the Federal Reserve raising interest rates. This is a tutorial written by economist Brad DeLong in February 1997 for one of his Economics classes...

-- Badtux the Depression Penguin


  1. I wonder if my econ prof still has that world map of co2 output I gave him in 99 to let him know that I understood "opportunity cost" and "externalities"?

  2. oh we have only just begun...... and the morons in congress are ensuring its depth

  3. But of course. Depressions are great for people who have money. They can pick up assets for pennies on the dollar and turn the rest of the nation into a serf class rather than an ownership class. It's easier to rob people with a pen than with a six-gun, as Woodie Guthrie was fond of pointing out...

    - Badtux the Depressed Penguin

  4. What if people just squat?

    Or take over the factories?

    Then what are those stupid enough to still worship Milton Friedman going to do?

  5. They'll do what they did the last time, they'll call the sheriff and have the people evicted at gunpoint, and arrested and sent to jail if they come back. Banks do have a massive squatting problem in their REO properties. But usually it's people cooking meth and stuff who are doing the squatting. I.e., people who have already demonstrated that they aren't afraid of jail, and who usually leave the house trashed and uninhabitable behind them.

  6. This is a good history. I agree with DeLong that strict monetary policy and strict fiscal policy worsened the Great Depression. I'm glad that we are off the gold standard now. I see that DeLong has respect for both Hayek and Keynes. While a conservative thinker myself, I do not agree with throwing out the baby with the bathwater. Keynes was right about monetary and fiscal policy. I think of it this way, if a person can borrow on hard times, then why can't the government?

    That said, I entirely disagree that spending for spending sake helps the economy. If it did, why don't we just pay every American one million dollars to dig a hole in their back yard? Government spending during a recession should follow the same pattern as it does during good times: pay for projects that a majority believe are needed and that cannot be undertaken by private enterprise. I can compromise and say that the government should even increase the number of projects it undertakes...with the guarantee that such spending increases are temporary in nature. So where does loose fiscal policy come in? Easing the tax burden. I agree with you that Bush used up about as all the leeway there is in this area. And I agree with you that it is a bad thing to have 50% of Americans pay no income tax whatsoever. My proposal is to leave income tax alone but to lower corporate and capital gains taxes.

    I see about four levers that the government has in combating a recession:
    1. monetary policy
    2. fiscal policy
    3. tax policy
    4. leadership

    Delong covers monetary policy and a little on fiscal policy. There were a great many mistakes in the latter two categories as well.

    P.S. BadTux, I saw your last post on Sergey's blog, I too am ex-Military. I too believe that murdering people is immoral. However, it can be argued that every single ideology or lack of one has caused deaths, so it is all to easy to be able to pin deaths on about anyone. Various debates show this: abortion debate, the debate over whether to intervene in Sudan, whether or not to intervene with the Taliban, whether or not to allow mercy killings (Schiavo). In all of these cases, there are quality of life issues, freedom of choice issues, and trade-offs.

    I also agree with you that family income is down, but I'm sure we disagree as to why and what the remedy would be.

    I'm glad you like guns. Ironically, I could care less about them, but I'm glad other people are out there increasing the deterrent factor on my behalf.

    Lastly, I can see we have lots of common ground. I dislike the federalization of airport security and the overall reduction in freedom.


Ground rules: Comments that consist solely of insults, fact-free talking points, are off-topic, or simply spam the same argument over and over will be deleted. The penguin is the only one allowed to be an ass here. All viewpoints, however, are welcomed, even if I disagree vehemently with you.

WARNING: You are entitled to create your own arguments, but you are NOT entitled to create your own facts. If you spew scientific denialism, or insist that the sky is purple, or otherwise insist that your made-up universe of pink unicorns and cotton candy trees is "real", well -- expect the banhammer.

Note: Only a member of this blog may post a comment.